With the peso trading tagged at ₱59.26 to the US$1, the Bangko Sentral ng Pilipinas (BSP) saw the Philippine currency recovering to end at ₱58.69 to the dollar, strengthening by 44 centavos from the previous record low of ₱59.13.
Analysts said the Bangko Sentral ng Pilipinas (BSP), which previously had flagged a tolerance for further weakness, could have intervened in the market but they warned, however, that the currency could hit a new all-time low if the dollar continued to strengthen.
According to Rizal Commercial Banking Corporation chief economist Michael Ricafort, “the latest downward correction to below the ₱59 psychological mark could have signaled intervention in the local foreign exchange market.”
Philippine Institute for Development Studies senior fellow John Paolo Rivera enthused that the local currency could weaken past ₱60 if the dollar strengthens further, external inflows decline, investors pull out due to corruption concerns or overseas Filipino workers (OFW)’s remittances slow.
Despite this, Rivera asserted that this could turn better as there is “hope the holiday-induced remittances can mitigate further depreciation to avoid inflationary pressures prompting the BSP to hold further rate easing.”
With the same view, Reyes Tacandong & Company senior adviser Jonathan Ravelas hinted that the peso hitting ₱60 was probable but not a “done deal.”
“The BSP has the firepower to defend the peso and our core fundamentals are still solid. What’s weighing us down is uncertainty—especially from the floodgate scandal/tariff uncertainty which caused the dollar to strengthen,” Ravelas pointed out.
“Expect BSP to act decisively if global shocks worsen or volatility spikes,” he added.
The BSP explained that the exchange rate was determined by market forces and that the country’s foreign exchange reserves remained “robust.”
“When we do participate in the market, it is largely to dampen inflationary swings in the exchange rate over time rather than to prevent day-to-day volatility,” it cited.
Bank of the Philippine Islands (BPI) senior economist Jun Neri said the peso’s fall was caused by factors including the BSP’s willingness to keep cutting interest rates and continued foreign selling in the local stock market amid a flood control project scandal.
“With inflation at manageable levels, the BSP might see the recent depreciation as tolerable. It might not be a concern from their perspective as long as the inflation forecast for the next 2 years remains within the target,” Neri noted
Accordingly, SM Investments Corporation economist Robert Dan Roces revealed that the main concern now was the pace of the peso’s movement, not its level.
“What matters now is speed and behavior of the move. A calm drift is tolerable; a rush risks sentiment and inflation expectations. I think it’s more of an orderly pace at the moment,” Roces opined.